Can a Senior File a Consumer Proposal or go Bankrupt?
There are no rules that prevent anyone from filing a Consumer Proposal just because you are 65 years of age. With today’s average of $69,000 in unsecured debt for those 60 years and over, the need to take action is important. The advantage that a senior has is that their pension income is a constant cash flow which can be used to finance the payment required for the Consumer Proposal. As well, creditors seem willing to accept a more reasonable (i.e. lower) settlement than they would if the offer to settle comes from a younger person. When every dollar counts, it pays to take advantage of anything you can.
A proposal is a scheme of arrangement whereby you offer to your creditors something less than the total of what you owe them. That is why you see advertising that you can save up to 75% of your debts and not go bankrupt. The key words are “up to.” Sometimes this is possible, but not always. It depends on who you owe and how much you owe them. Very few proposals require you to turn over your car or other assets as part of the terms of your proposal.
If you do not owe money on your car to a bank or finance company, you need only to disclose the value of the car on your list of assets. Note that your car is exempt in Ontario to a value of $5,650. This increases to $11,300 if it is used for business purposes.
If you still owe money on your car, remember that the bank or finance company does not want your car – they want your monthly payments to continue – that is how they make money. If your payment history has been good, your trustee/administrator of your proposal will be able to assist you in keeping your car.
In exceptional circumstances, you may find that your car payments are much higher that you can afford. The debt on the car may be much higher than the car is worth and you may want to get out of an unfavourable contract. Your trustee/administrator of your proposal can still help you by arranging for your car to be turned in to the secured creditor (the bank or finance company) before you sign the papers for your proposal. The debt owing to the bank or finance company will be estimated as net of the selling price of the car. This debt will be included in your proposal. The estimate will be updated once the car is sold and the actual loss to the bank or finance company is known. Your trustee/administrator of your proposal will often assist you in obtaining a more affordable vehicle either prior to or during the early stages of your proposal.
A good trustee/administrator of your proposal should be considered as a resource person to help you solve all of your financial problems. He or she has seen many similar problems in the past and can assist you in your recovery.
Please also refer to our blog: Bankruptcy – What is a Discharge.
While you are bankrupt, your position is that of an “undischarged bankrupt.” This means that you have to continue to supply budgets, tax returns and other information to the trustee on an ongoing basis. You are not allowed to apply for a loan, line of credit, bank overdraft, mortgage, etc. for an amount over $500 without disclosing that you are an undischarged bankrupt. The chances of being approved are very poor. If you come into an inheritance or win a lottery while you are still bankrupt, your trustee will have a talk with you about who gets the money. The trustee will explain that an “after acquired asset” is an asset acquired by the bankrupt person between the date that you filed the bankruptcy and the date you are discharged from your bankruptcy. You will not be happy with what you hear. Mortgage companies may renew an existing mortgage (usually at a higher than normal rate) but they will rarely allow you to increase the mortgage nor will they issue a new mortgage to an undischarged bankrupt.
Your discharge from bankruptcy is the start of your recovery and rebuilding of your financial life. You will be able to apply for a credit card or line of credit with a reasonable chance of success. Your trustee will assist you in this process. The credit bureaus (Equifax Canada and Trans Union of Canada) both keep a record of your bankruptcy for 6 years after you are discharged (14 years if it is a second time bankruptcy). The faster you get your discharge from bankruptcy, the faster it will disappear from your history. Translation – it will be easier, faster, cheaper to get a credit card or borrow money for the purchase of a car or house after you are discharged from bankruptcy than it is while you are still in the bankruptcy process.
For a definition of discharge, please refer to our blog: Bankruptcy – What is a Discharge.
If you are filing an Assignment in Bankruptcy for the first time, there is a period of time that is allowed for the trustee to complete their administration of your bankruptcy. The earliest time that you can be discharged from your bankruptcy is 9 months from the date that you originally filed the bankruptcy. Surplus income (if it applies) will extend your discharge date from 9 months to 21 months. Other problems may result in your trustee, a creditor or the Office of the Superintendent in Bankruptcy opposing your automatic discharge date to a future undetermined date. This future date is determined by your trustee only after all of the original problems are resolved. When your trustee requests you to supply information or answer questions that may arise during the administration of your bankruptcy, “failure to cooperate” with the trustee is the most common reason why your trustee will oppose your automatic discharge.